Debenture

Debentures are corporate bonds backed solely by the issuer's credit rating and promise to pay, without specific assets as collateral. This makes them riskier than secured bonds but typically offering higher yields to compensate investors. Debenture holders are general creditors in bankruptcy, ranking below secured creditors but above equity shareholders. Companies with strong credit ratings can successfully issue debentures, relying on their overall financial strength and cash flow generating ability. Debentures may include various features like convertibility into equity, callable provisions, or subordination clauses. They provide companies flexible financing without pledging specific assets while offering investors higher yields than government securities.